According to Marxist political economy, exploitation is the key factor which underpins the very fundamentals of society. By this Marxists believe exploitation is more than simply an economic phenomenon, but instead a norm created through false consciousness, which has infested itself within all aspects of society; stretching from the state, to the very structure of the social system.
Marx emphasis on exploitation lies in his belief that the value of a ‘commodity’ is purely derived from the accumulated labour expended to produce such a good. Although the ‘labour theory of value’ was originally contemplated by Classical Economist such as Smith/Ricardo the emphasis for Marx was on labour as a value rather than simply a cost in the production process. As Dooley explains ‘Marx maintained that labour was the sole value creating substance’ (Dooley 2005) and this point is further developed by Sayer who states that the fundamental distinguishing characteristic of Marxism ‘is the existence of labour-power as a commodity’. (Sayer 1979). For Marx labour was the source of all wealth in society, which would ultimately be transformed by the bourgeoisie into ‘surplus value’ and profit through numerous industrial policies such as specialisation through division of labour. Capitalism is a system that encourages ‘alienation’ of the worker as the commodities produced are not produced for need or desire, but instead in the pursuit of profit.
It’s from this concept that exploitation can be explained. Marx defined exploitation as the surplus value extracted from the labour force in order to generate profit. This would be achieved through paying wages lower than the value of the commodity produced. Such a theory remains evident in the now globalised world market, for example sweatshops in developing nations, where the rate of surplus value remains high due to the low cost of production and low wage demands.
Marxist Political Economists also emphasis the impact and importance of technical progression on surplus value. As firms increase investment into capital machinery in order to increase productivity and profits, the value of the commodity being produced is reduced. At the same time the labour time required to produce the good is reduced. Simplistically this means that labour time increases but the commodity is produced on a greater scale, this meaning an increase in the extraction of surplus value at the expense of the proletariat.
However, such a theory of exploitation is not always accurate within a capitalist system. Take for example a perfectly competitive market structure and the impact on wage determination. As firms are wage takers in such a competitive market, the supply of labour becomes perfectly elastic. Therefore a firms average costs = marginal cost of hiring an extra worker. Therefore in theory, employees are being paid there Marginal Revenue Product i.e. the value of their work.
In reality however there are very...